MICHAEL JACKSON, once the richest musician in the world, now faces the ignominy of handing over his back catalogue to pay off a $270 million (£147 million) debt.
Hints of the troubled star’s dire financial circumstances were revealed during his 13-week child molestation trial in California, as it was claimed that his enormous and unusual expenses have far outweighed his earnings for years.
Yesterday it was disclosed that the singer is much deeper in debt than many had thought, with so little money coming in that he has been unable to meet monthly loan payments. At one point, according to sources, the singer’s staff were worried that he might not be able to afford to pay his electricity bill.
After he was unable to repay interest of $300,000, the Bank of America loans totalling $270 million were sold on to Fortress Investments, a company that specialises in “distressed debt”.
Experts believe that, guilty or innocent, Jackson will eventually be forced to sell his prized 50 per cent stake in Sony/ATV, a company that owns a huge back catalogue of songs, including 251 famous Beatles tunes, some of Bob Dylan’s finest work and hits by Joni Mitchell and Stevie Nicks.
Teams of advisers, which included the Rev Jesse Jackson, the one-time presidential candidate, have tried to intercede on the star’s behalf to keep the debt collectors from his door.
Others have advised him to sell at least a part of the catalogue but the singer is said to have an emotional attachment to the catalogue, especially the Beatles songs.
He is being advised in the matter by John Branca, a well-known music industry lawyer, and Charles Koppelman, the vice-chairman of Martha Stewart’s media company.
Jackson bought the back catalogue in 1985, at the height of his popularity, for $47.5 million from Robert Holmes a Court, an Australian tycoon.
A decade later, with money troubles and his unusual lifestyle becoming ever more apparent, Jackson agreed to merge the back catalogue with Sony’s smaller library of songs.
It is thought that the Japanese entertainment giant paid Jackson about $150 million to acquire the rights to half of the lucrative catalogue. Today, the back catalogue is estimated to be worth about $1 billion, Jackson’s share being worth $500 million.
Throughout the late 1990s Jackson’s money troubles worsened as his record sales declined and his concert tours commanded smaller audiences. The former child prodigy was more often lampooned for his weird appearance and peculiar speaking voice than he was celebrated as a singer and dancer.
In 2002 he was sued in California by the Union Finance and Investment Corporation, which claimed that he owed it $12 million.
The lawsuit stated: “Michael Jackson was — and is — a ticking financial time-bomb waiting to explode at any minute.” Since then Jackson’s financial position has only worsened. After his arrest last November, his record sales are understood to have declined further.
The trial, which started in February, is estimated to have cost $10 million so far, heaping further financial pressure on the singer.
Fortress Investments, which has interests in private equity and in buying up “distressed debt” — a finance industry term for loans that are in default — has agreed to give Jackson more time to pay.
The company is understood to have given him until December to make his owed payments. But, if he continues to default, Fortress could force him to sell any or all of his assets, including the MiJac back-catalogue – the company that controls the copyrights on his own songs.
Fortress, which has offices in New York, London, Rome, Geneva and Sydney, has some $15 billion of assets under management. It looks after money for 300 leading pension funds and many so-called high net-worth individuals.
Part of its business spans the high-risk world of hedge funds, where the super-rich and investment companies make big bets on the world markets.
Jackson believes that his recent travails with the banks and the courts are all part of a giant conspiracy designed to relieve him of the Sony/ATV back-catalogue.
But whatever the outcome of the child molestation trial it is likely that he will have to begin at least to reassess the amount of debt he keeps in relation to his assets.
If he is found guilty he may be forced into a fire sale of his billions of dollars of assets. Even if the jury declares him to be innocent there is speculation that he may file for bankruptcy as a means of tying up his old debts to start a new life.
- Jackson’s chief lawyer, Thomas Mesereau Jr, issued a statement last night saying that no one had been authorised to hold news conferences on his client’s behalf.
The statement came shortly after Raymone Bain, Jackson’s spokeswoman, held a press conference at the courthouse.
“A gag order is in effect which the defence team will continue to honour,” Mr Mesereau said.
HIS OUTGOINGS
Bills keep rising for man who can't stop spending
MICHAEL JACKSON spends $20 million (£11 million) to $30 million more than he earns every year, according to accountancy experts who testified at his trial.
Neverland, his bizarre theme park home, costs as much as $120,000 a month to look after.
With giraffes, elephants and monkeys to feed, hundreds of staff to pay and, at one time, thousands of children to lavish with gifts, the homestead was not designed to be cheap.
It has also been speculated that the former King of Pop made payments of $1.5 million in alimony to Deborah Rowe, his ex-wife. Then there was the famous $4 million shopping spree at a Las Vegas furniture store. John Duross O’Bryan, a forensic accountant, who gave evidence for the prosecution at the trial, traced Jackson’s assets and liabilities from 1999 to 2004.
The witness said he obtained only one balance sheet, from June 30, 2002, and it showed Jackson with a net worth of negative $285 million. He said this included assets of $130 million and liabilities of $415 million.
Jackson has the daily cost of his entourage to court. They include his three brothers — Randy, Jermaine and Tito — as well as the entourage of bodyguards and advisers that sweeps up to the courtroom each day, umbrellas in hand, from Jackson’s Neverland Ranch in the nearby village of Los Olivos.
A 2003 piece in Vanity Fair magazine estimated Jackson’s monthly expenditures at $1 million and claimed that the pop star was incapable of economising and prone to eccentric spending, including a $10,000 monthly charge from a Beverly Hills chemist.
HIS ASSETS
Catalogue loss could leave him blowin' in the wind
SIR PAUL McCARTNEY would be forgiven for observing Michael Jackson’s latest financial problems with a little hint of Schadenfreude.
The back catalogue of 251 Beatles songs owned by Sony/ATV, an entity 50 per cent controlled by Jackson, could soon be put on the auction block, depending on the outcome of the American singer’s trial.
The entire catalogue is estimated to be worth $1 billion and contains greats such as Sir Paul’s Yesterday as well as Bob Dylan’s Blowin’ in the Wind and other classics. Sir Paul has been privately distressed about the ownership of some of the greatest songs he wrote since the catalogue was bought by Jackson in 1985.
Just three years earlier he and Jackson had recorded The Girl is Mine as a duet, and in 1983 Say, Say, Say. They were considered friends. But, according to press reports at the time, Jackson’s acquisition of the Beatles catalogue for $47.5 million ended that friendship.
Today, the same billion-dollar catalogue attracted the interest of Fortress Investment Group, a New York investment firm, that has taken on $270 million of debt owed by Jackson.
Fortress could try to force Jackson to sell his 50 per cent stake in the back catalogue, along with other assets such as the MiJac catalogue that contains the copyrights to all of the American singer’s records, if he continues to default on his loan repayments.
If Fortress forces a sale of the Sony/ATV stake, Sir Paul could doubtless find a way of buying back Yesterday and all the other songs he has been without for the past two decades.
